Confucianism in Chinese and Japanese Accounting Systems

Topics: China, Confucianism, East Asia Pages: 9 (2633 words) Published: October 19, 2012
Table of Contents
The definition of Confucianism2
Implications of Confucianism for East Asian accounting4
The reform of Chinese accounting5
The influence of Confucianism in Chinese accounting7
1.) The Government7
2.) Accounting Ethics7
3.) Conservatism8
Japanese Accounting and Confucianism8

In order to understand the present day accounting methods and principles of China and Japan it is essential to understand the history of both of these nations and focus on the issues that have led to these events. In this paper we will discuss how the influence of Confucianism has directly affected both China and Japan in a cultural and economic sense. After a brief discussion of Confucianism and the history of East Asian accounting we will thoroughly examine the consequences of these nations regimes post 2005. We will discuss how these events have changed the Chinese and Japanese accounting systems of today and how Confucianism is the underlying factor in these reforms.

The definition of Confucianism
Confucianism elaborates on the values of loyalty, filial piety, honesty, benevolence, righteousness, rituals, and truthfulness. This doctrine was developed over 2000 years ago by Confucius, who provided a to guide people for dealing with all types of crisis’s using right moral conduct and the right behaviour in the future (Aiken, 1998). Basically, Confucius provided a framework to identify what is right and glorious, especially for encouraging people continue to achieve their objectives when they face adversity. Also, he suggested that both the rulers and the ruled could establish certain relations in order to decrease adversarial relationships (Gao, Handley-Schachler, 2003). In the theory there is an emphasis on change, which means everything is changing all the time and even people belong to this dynamic process (Tang, 2000). People will interrelate with each other and cannot live alone. Confucius states that the communal welfare is more important than self-interests. Confucianism also emphasises that education plays a significant role in society. It abandons discrimination and also can facilitate the development of society and the growth in the economy (Aiken, 1998). It favours teaching moral behaviours and ethical practice; for instance, common people usually efficiently heed moral examples rather than government’s edicts. However, it can also be true that individuals are influenced by law and edicts, which compels people to only pay attention to legal form. According to People’s Republic of China (2001), competition is a fundamental and important standard in the society. However, competition can be viewed as “counterproductive” in the East Asia. This is because they believe the most important standard is cooperation. In the western perspective, auditing has violated the main tenet of Confucianism, which is trust. The concept of transparency can justify its auditability by a pragmatic realism. Therefore, Confucianism believes that avarice drives the process of business and the purpose of a merchant, and the accountant is an unworthy occupation, especially for the senior.

Implications of Confucianism for East Asian accounting
According to News Release (2001), the implications of Confucianism results in the accounting system tending to focus on structure and form. This deals with the conformity of traditional practices rather than innovative procedures. Therefore, people adhere to traditions and century long rituals. Confucianism leads people to loyalty to nation, family, friends, and filial piety, which can bring the relationship of nepotism. Nepotism refers to the secrecy of accountants. In the doctrine of means from Confucius emphasizes of the concept of moderation. This means that choosing a middle approach can be taken to deal with uncertainty situations. The pathway has been manifested in accounting in terms of more extensive risks...

References: Aiken, M. and Lu, W. (1998) Cultural and Administrative Antecedents of Financial Disclosure in Modern China, Atlanta, GA: Academy of Accounting Historians Meeting.
Gao, S.S. and Handley-Schachler, M. (2003) ‘The influences of Confucianism, Feng Shui and Buddhism in Chinese accounting history’, Accounting, Business and Financial History, 13.
News Release, Accounting Standards Board of Japan, Financial Accounting Standards Foundation (2001). Establishment of the Financial Accounting Standards Foundation People’s Republic of China. Accounting Standard: ‘Borrowing Costs.’ Ministry of Finance.
People’s Republic of China (2001) Accounting Standard: ‘Intangible Assets’ Ministry of Finance.
People’s Republic of China (2001) Accounting Standard: ‘Leases’. Ministry of Finance.
Tang, Y. (2000) ‘Bumzy Road Leading to Internationalization: A Review of Accounting Development in China.’ Accounting Horizons, Vol. 14, No. 1, March: 93–102.
McKinnon, J. 1986, The Historical Development and Operational Form of
Corporate Reporting Regulation in Japan, New York, NY: Garland.
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